To explore the concept of collecting receivables, I first want to share with you the day I met with the funeral director who handled my father’s funeral. I had been in this profession as a consultant for about a decade, and to prepare for the aging of my parents, I set up a joint checking account with my folks.
When my dad, Max, died, I went to the funeral director with my father’s checkbook in hand to make his final arrangements. I picked out the casket and arranged the other service details. (The cemetery plot had been pre-purchased.) When we were finished, I said to Bennett, the funeral director: “I have Max’s checkbook here. How much do I owe you?”
Bennett said, “Dan, we will send you a bill.” I said, “Bennett, please, let me write you a check now,” to which he replied, “Dan, you know how these things work; there might be some additional death certificates. We will just lump it together and send you a bill in about a month.” I responded, “Bennett, Max never owed anyone any amount of money during his life. I am not going to let him start slow-paying people on the first day of his death!” Bennett just got up and walked out, saying over his shoulder, “I will bill you.” In the funeral service profession, it’s important to understand that collecting receivables is not about a sign on the desk – it’s about an attitude in your head. Here are four objectives to collecting receivables and cutting down bad debt.
OBJECTIVE #1: Cull The Herd
Whenever you make at-need arrangements, there are two groups of people with whom you deal: those who have every intention of paying and those who have every intention of not paying. You must separate the herd. Usually, only about 2% of people do not intend to pay, but if you don’t get them to pay for their loved one’s funeral, you’ll be the one paying!
Those who do not intend to pay don’t dress differently from those who do. They don’t drive a better or worse automobile. Their education is not greater or lesser than those who intend to pay. So, how can you figure out who they are? One question to ask yourself is whether you have previously served the family. Sometimes, you will gain market share because someone still owes your competitor money. Thus, if a new family comes to you that has lived in the community, casually ask them, “I know you have used ‘Mr. Smith’ previously. We are honored you have chosen us today. What caused you to ask us to serve you?”
Another way to tell if you might be dealing with people who don’t intend to pay is by asking for payment before you begin serving the family, or before publishing a service date. You cannot hold a dead body hostage for payment, but you can tell the family, “If anyone asks, we will tell them service arrangements are not yet finalized.” Trust me, their circle of friends knows who their deadbeat friends are, so hearing this answer will not surprise them.
Unfortunately, society has changed. In the past, not paying bills in a timely fashion was dramatically frowned upon, and bankruptcy was a terrible stain on a person’s reputation. In the early years of the 2000s, however, the housing debacle flipped many people “upside down” on their home mortgages. Did you know there were 3.1 million housing foreclosures in 2008? That’s about 1 of every 50 homes. That same year, there were more than 1.1 million bankruptcies – almost 1 out of 100 households. If that many people don’t worry about a blight on their credit record, why would they worry about paying a funeral bill?
OBJECTIVE #2: Recognize the “Worthy Poor”
Funeral service is the only group of businesses that provides for the worthy poor. In some cases, your state or county might help, but I have never seen a funeral home turn away a worthy-poor family that requested help to provide for their loved one’s needs at death. If you do provide, you might limit the consumption of merchandise to a minimum casket or service. That is your right since you are the one providing for the funeral and the merchandise, with or without state or county support.
There are two ways to know you are working with the worthy poor. When you tell the worthy poor what you are willing to do for their loved one, the only words you’ll hear are, “Thank you.” The unworthy unpoor will say, “Can we pay to upgrade [to this or that]?”
The second sign you are dealing with the worthy poor involves the number of death certificates they need. A true indigent person might need one or two at most. The unworthy unpoor will ask for multiple copies of death certificates.
OBJECTIVE #3: Use Your GPL as a Tool
Who taught you how to plan a funeral? Did they give you a script to follow or just an outline? Have you modified that approach during your career or do you do it the same way now that you did two dec-ades ago? Do you start with the biographical information or the desired service planning?
How about another approach? Start by asking the family members gathered to tell you about a funeral they thought was meaningful. Learn what they found to be of value in other services they attended. Next, ask them the same thing in reverse, i.e., “What funeral service(s) have you attended that you felt were not proper?”
After you have this conversation, emphasize your general price list and tell them: “We are going to start to plan the funeral, and these are our prices for every service. I will make sure we keep to your budget and make decisions that are more like the funerals you thought were meaningful and avoid the items you didn’t like.”
Then ask the family if they are aware of any form of prearrangement or of any accounts with any funeral home, including yours, that their deceased love one had.
Identify early on the individual(s) who will be responsible for payment. Obviously, if there is life insurance, be prepared to discuss how to handle the insurance. If there is no life insurance, no preneed and no payable-upon-death account(s), you will know that you are dealing with the payor(s) seated at the table.
OBJECTIVE #4 : Ask and You Shall Receive
Many years ago, Curtis Rostad (funeral home owner, speaker, state association director) came up with a simple tool for collecting receivables that involved the language the arranger would use during the arrangement conference. At the conclusion of the selections, the arranger would remember two acronyms. The first, HWYLTPFTE, stood for the simple question, “How Would You Like to Pay for These Expenses?” The second, which was not said aloud, was KYMS, which stood for “Keep Your Mouth Shut.”
Rostad recognized a few things. First, HWYLTPFTE is a simple question that defines the responsibility of who pays for the choices. Second, whosoever speaks first winds up paying for the funeral, so KYMS. If the funeral director is uncomfortable with the silence and speaks first, he or she might offend the family or give absolution for the payment obligation.
The reason this worked then and still works today is simple. Today, we have a quantifiable resource called a credit score. Unfortunately, most funeral arrangers do not use credit scores to determine how to handle people who want a deferred form of payment. If people seek deferred payment, get permission from them to check their credit score. (And no, do not assume a bad credit score means he or she is bad person. It has nothing to do with character.)
In reality, nearly 17% of people have credit scores too low to secure any kind of credit, except prepaid credit. You cannot tell a person’s credit score by looking at them – some people driving expensive cars have high credit scores but don’t have enough money in the bank to pay an $8,000 bill! Thus, you need to talk to the people arranging the funeral with you to find out what they can afford. And “afford” means “pay for today.”
Funeral service is a noble profession based on its duty and its people. No other business provides for the poor out of its own pocket. No other profession carries about 10% of its annual revenue as receivables. No other profession that has receivables has unsecured, no-recourse receivables. The whole of funeral service, by my estimate, has more than $330 million in receivables on the street each day of the year!
Finding a way to help families arrange a dignified funeral they can afford will make your calling even more dignified and noble.